Archive for February, 2016

Winners and Losers from the 2016 New State Pension

Friday, February 26th, 2016

Winners and Losers from the 2016 New State PensionThe New State Pension comes into force from 6 April 2016 and new UK pensioners will find a number of differences, with some pensioners gaining from the changes, while others will lose out.

What is the New State Pension 2016?

The new pension applies to everybody reaching pensionable age on or after 6 April and amounts to a maximum total benefit of £155.65 each week. Amounts of pension due are based on National Insurance records and pensioners will need a minimum of ten years payments in order to qualify for the minimum payments.

The new maximum pension is higher than the existing maximum rate of £115.95 weekly, however, you need at least 35 years of qualifying National Insurance contributions to achieve payments at this level. You could still qualify for the maximum pension if National Insurance credits were allocated at times during your life, for example if you were a carer, unemployed or parent with childcare responsibilities.

Does Everyone Qualify for the New State Pension?

The UK Government has failed to highlight just how many changes have been put in place and how they will affect new retirees and people who are approaching retirement age. An MPs enquiry is currently underway to investigate reasons the government failed to communicate all the forthcoming changes in a comprehensive manner to the public.

Reviews of the new regulations have already highlighted that only about 37 percent of retirees in 2016/17 are likely to qualify for the full rate of payment, as anybody who contracted out of the State Pension Scheme to join employment schemes will be unable to receive full payments. If you don’t qualify for the maximum payment, payments made into vocational schemes should ensure you won’t lose out financially.

Who Are the Winners and Losers Under the New Pension Scheme?

The major losers under the new scheme will be higher earners who won’t qualify for such generous state pension. It is felt likely that these pensioners would usually have built up substantial vocational pension and/or savings to mitigate any losses, however.

Winners under the new scheme are likely to be women who may only have partial National Insurance contribution records, alongside substantial credits due to carer responsibilities. Additionally, self employed people who have run their own businesses are likely to have access to higher payments. The total benefit to women and the self employed under the new regulations is likely to amount to around £40 per week, so it’s a genuine increase for some people retiring from April 2016 onwards.

What Can You Do to Improve Your Life At Retirement?

Increased likelihood of living longer has also meant reforms to the retirement age. From the year 2020 pensionable age goes up to 66 for men and women, and increases to 68 by the year 2046.

If you’re nearing retirement age now, it may be disappointing to consider you could have to work until the age of 66 and it’s important to find out what your state pension is likely to amount to. It’s possible to receive an accurate state pension forecast if you’re over the age of 55, and this will give you indicators of any additional savings or investments you need to put in place.

There are a number of resource available to help you understand all the potential pension and saving options. However this information is often generic and should not be taken as advice. In order to make the best decision about your financial future it is recommended that you seek professional pension advice from an experienced adviser. They will be able to help you put together a savings plan that fits your needs.

Maxim Wealth Management have been helping clients across the UK find their perfect saving vehicle since 2001. If you are interested in financial advice please contact us today for a free consultation: Glasgow 0141 764 0040 or London 0207 112 8654.

Are You Considering An Equity Release Plan?

Tuesday, February 16th, 2016

Are You Considering An Equity Release Plan-If you were thinking about Equity Release, you would not be alone. Sales of plans have risen over the past year and are set to rise further still.

Equity release plans were first introduced in 1965 and have since undergone many transformations however the recent steady rise can be attributed to the new pension freedoms which have widened the choice in pension solutions. This change has resulted in many considering their home as part of their retirement portfolio.

Rising House Prices

Last year pensioners freed up £4.7m a day from their properties, bringing the total value of property wealth released in 2015, to a staggering £1.71 billion. Sales of Equity Release plans rose to 23,747 in 2015 which was an 11% increase on the previous year.

Research has shown that the average customer released £72k, with Londoners releasing £128k – overall customers in the South East released an average of £84k. This increase in demand, is due to rising house prices, boosting confidence in using property wealth to increase retirement income.

Why Release Equity from Your Home?

There are many reasons for thinking about releasing the wealth from your most valuable asset.

Last year the most popular reason was home or garden improvements. 30% chose to use the money to enjoy a holiday and another 31% used the money to pay off credit cards and loan debts.

Debt in retirement is a cause for concern for some and can be a worrying and serious issue. A total of 24% of customers unlocking the value of their homes were doing so in order to pay off their mortgages. Where homeowners had once taken out endowment mortgages, with only the interest being paid off each month, these endowments failed to live up to the forecasts promised when originally sold. This in turn has left some homeowners with a shortfall and looking for alternative ways to cover the capital sum borrowed and allow them to stay in their homes.

This interest only mortgage problem is set to get worse in 2016, which makes money releasing plans all the more popular. The two main plans are open-ended Interest Only Mortgage where no payments are made by the borrower and an open-ended Interest Only Mortgage where interest payments are made to the lender. Either plan may also include a lifetime mortgage or home reversion plan.

67% of Equity Release Sales Made Last Year Were Drawdown Plans

Around 67% of Equity Release sales made last year were drawdown plans. A drawdown plan allows you to withdraw money in chunks as and when you need it, rather than taking out one big lump sum. The advantage to this type of plan is interest will only be payable on the money taken which can dramatically reduce the overall costs.

Releasing Equity from Your Home: An Important Financial Decision

Releasing equity is a decision not to be taken lightly and here at Maxim Wealth Management we have advisers who can help you make the right decision. Equity release is a lifetime commitment and will usually only be repaid when either you or your partner dies or go into long term care. It is important you seek financial advice about equity release as releasing equity from your home may affect entitlement to state benefits and your tax position. If for any reason you decide to pay back the loan early, it is possible that early payment charges may apply.

To request a FREE equity release consultation with Maxim Wealth Management please complete our Contact Form or call us direct at our London office: 0203 841 9941 or Glasgow office: 0141 764 0040

5 Pension Mistakes You Should Avoid

Wednesday, February 10th, 2016

5 Pension Mistakes You Should AvoidMany young people don’t think about their retirement. Even people reaching that inevitable age can bury their heads in the sand about building a pension pot; not wanting to face the truth that they are growing older.

This way of viewing retirement is understandable however the sooner you begin saving, the bigger the pot you will be able to build – something your future self will thank you for.

If you are unsure where to begin here are five pension mistakes you should avoid if you wish to maintain a similar standard of living in retirement to the one you have currently enjoy.

1. Not Having a Pension

The basic state pension will change to a flat rate of £155.65 per week from April this year (for people who have paid 35 years of NI). This equates to below £10,000 per annum. For many people this is a huge cut in their salary and not enough to maintain a reasonable standard of living.

You should also consider the fact that the pension age is rising over the next few years, so those wishing to retire in their early 60s will need to have other resources to live on until their state pension kicks in.

2. Delaying Saving

The value of your pension pot at retirement is based on the amount you put in and the length of time it is invested.

Whilst diverting your money into savings early on in your career may seem unfavorable when you are young, your older self will greatly appreciate it.

3. Not Understanding Your Options

There are a number of ways to save for retirement. You might be best suited to an ISA, whilst others may benefit more from a SIPP. What is best for you may not be the same as what is best for your friends or other members of your family. Understanding the difference and finding the option that suits you best is crucial for your pension pot to grow the way you want it to.

4. Failing to Review Your Pension Regularly

Do you know how much your pension pot is worth? Or which funds you have and their associated risk? If you currently have a financial or pension adviser, you may benefit from switching.

5. Not Seeking Pension Advice

The government launched a free service, Pension Wise, to help you understand what you can do with your pension pot money which people had found the website helpful to various degrees. It is important to note that the service offers guidance on what individuals can do, but not necessarily what they should do.

For detailed, individual advice on pensions it is worthwhile researching financial advisers who will be able to provide you with more specific advice on what you should do given your circumstances and attitude to risk.

Maxim Wealth Management offer financial advice from our offices in Glasgow and London. To request a FREE consultation please call us on 0203 841 9941  (London) or 0141 764 0040 (Glasgow). Alternatively you can fill in our contact form and we will get back to you.

The Pension Changes You Need to Know

Friday, February 5th, 2016

The Pension Changes You Need to KnowGeorge Osborne delivered his Spending Review and Autumn Statement on the 25th November last year.

In this statement the Chancellor did not announce any radical changes to the private pension system, for the first in this Parliament. He did however set out proposals for other areas regarding pensions which are detailed below.

The full changes will be understood in the March 2016 Budget.

New Basic State Pension

The new basic state pension will increase by £3.35 to £119.30 a week on April 6, the biggest rise in 15 years.

A New Flat-Rate Pension Will Be Implemented

There will be a new flat-rate pension set at £155.65 a week for anyone who reaches state pension age on or after April 6 next year. For someone working full-time today this equates to approximately 60% of the living wage.

The new flat-rate pensions aims to eliminate the current, complicated systems in which people receive a basic pension as well as extra payments based on their NI contributions.

Auto-Enrolment Delayed

A planned increase in the minimum pensions contributions employers would have to give their staff has been pushed back. The auto-enrolment, originally planned for October 2017 and 2018 will now come into force in April 2018 and 2019 instead.

Changes to Pension Credit

People who claim pension credit will have their payments stopped if they are out of the UK for more than four weeks. This replaces the old limit of 13 weeks.

The State Pension Age Will Rise

From 2020, the state pension age will be 66 for both men and women. This will increase to 67 between 2026 and 2028, and will be then linked to life expectancy after that.

ISA Allowance Frozen

The ISA allowance will be frozen at £15,240 and at £4,080 for Junior ISAs.

Are You Confused About Pension Changes?

If you are confused about the changes in pensions, or are unsure what the best saving vehicle is for you and your family, you should speak to a financial adviser who will be able to explain the possible options available to you.

Maxim Wealth Management are an independent financial advice company, with offices in Glasgow and London, covering the whole of the UK. To discuss your pension or retirement please contact us today:

Email: enquiries@maximwm.co.uk

Glasgow: 0141 764 0040

London: 0203 841 9941

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